Hedge funds run by legendary names like George Soros and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant outperformance. That's why we pay special attention to hedge fund activity in these stocks.
Is Hub Group Inc (NASDAQ:HUBG) a buy right now? Prominent investors are selling. The number of bullish hedge fund bets retreated by 5 in recent months. Our calculations also showed that HUBG isn't among the 30 most popular stocks among hedge funds (see the video below). HUBG was in 18 hedge funds' portfolios at the end of the second quarter of 2019. There were 23 hedge funds in our database with HUBG positions at the end of the previous quarter. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's take a look at the new hedge fund action regarding Hub Group Inc (NASDAQ:HUBG).
How have hedgies been trading Hub Group Inc (NASDAQ:HUBG)?
Heading into the third quarter of 2019, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of -22% from the first quarter of 2019. By comparison, 20 hedge funds held shares or bullish call options in HUBG a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Hub Group Inc (NASDAQ:HUBG) was held by Diamond Hill Capital, which reported holding $136.6 million worth of stock at the end of March. It was followed by Fisher Asset Management with a $54.3 million position. Other investors bullish on the company included Millennium Management, D E Shaw, and Citadel Investment Group.
Due to the fact that Hub Group Inc (NASDAQ:HUBG) has experienced bearish sentiment from hedge fund managers, logic holds that there lies a certain "tier" of hedge funds that decided to sell off their positions entirely heading into Q3. Intriguingly, Alexander Mitchell's Scopus Asset Management sold off the largest investment of the 750 funds monitored by Insider Monkey, totaling an estimated $16.7 million in stock, and Richard S. Meisenberg's ACK Asset Management was right behind this move, as the fund dumped about $7.9 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 5 funds heading into Q3.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Hub Group Inc (NASDAQ:HUBG) but similarly valued. We will take a look at American Woodmark Corporation (NASDAQ:AMWD), MRC Global Inc (NYSE:MRC), Linx S.A. (NYSE:LINX), and Sirius International Insurance Group, Ltd. (NASDAQ:SG). This group of stocks' market values are closest to HUBG's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AMWD,9,36128,-3 MRC,15,105613,-3 LINX,14,84329,14 SG,1,3377,0 Average,9.75,57362,2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.75 hedge funds with bullish positions and the average amount invested in these stocks was $57 million. That figure was $245 million in HUBG's case. MRC Global Inc (NYSE:MRC) is the most popular stock in this table. On the other hand Sirius International Insurance Group, Ltd. (NASDAQ:SG) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Hub Group Inc (NASDAQ:HUBG) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on HUBG as the stock returned 10.8% during Q3 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.
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